Cincinnati Sub-Zero Acquisition

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Cincinnati Sub-Zero Acquisition

Note 4 — Cincinnati Sub-Zero Acquisition

CSZ develops, manufactures and sells patient temperature management systems and product testing equipment.  The patient temperature management systems regulate the body temperature of medical patients during and after surgery.  The product testing equipment simulates temperature, humidity, altitude and vibration conditions and is customized for use in a wide variety of industrial manufacturing applications.  

Results of operations for CSZ are included in the Company’s consolidated condensed financial statements beginning April 1, 2016.  CSZ contributed $51,540 in product revenues and a net loss of $1,092 for the nine month period ended December 31, 2016.  

Note 4 – Cincinnati Sub-Zero Acquisition – (Continued)

Purchase Price Allocation

The purchase price of $73,593, net of cash acquired of $985, has been allocated to the values of assets acquired and liabilities assumed as of April 1, 2016.  An appraisal by an independent third party valuation firm was completed to assist management in determining the fair value of acquired assets and assumed liabilities, including identifiable intangible assets. The fair values of acquired assets and assumed liabilities were determined using the cost approach that relied primarily internal sources of data to make assumptions that are not observable in the market (Level 3 inputs).  The purchase price allocation was finalized during the fourth quarter of 2016. The allocation as of April 1, 2016 was as follows:

Accounts receivable	$	10,790
Inventory		16,284
Prepaid expenses and other assets		1,143
Property and equipment		12,919
Customer relationships		11,700
Technology		3,200
Trade name		6,370
Goodwill		24,622	a
Assumed liabilities		(13,435	)
Net assets acquired		73,593
Cash acquired		985
Purchase price	$	74,578

(a) The amount of recorded goodwill includes $2,000 of consideration owed to the seller for a tax gross up.

The gross contractual amount due of accounts receivable is $11,126 of which $336 is expected to be uncollectible.  

The purchase price allocation includes an approximate $4,000 step-up in the underlying net book value of the inventory to its fair value.  This inventory was sold to customers and expensed to cost of sales during the three month period ended June 30, 2016.

Supplemental Pro Forma Information

The unaudited pro forma combined historical results including the amounts of CSZ’s revenue and earnings that would have been included in the Company’s consolidated statements of income had the acquisition date been January 1, 2016 or January 1, 2015 are as follows:

	Three Months Ended December 31,		Twelve Months EndedDecember 31,
	2015		2016		2015
Product revenues	$	232,324	$	933,505	$	919,651
Net income	$	27,272	$	74,485	$	94,833
Basic earnings per share	$	0.75	$	2.04	$	2.63
Diluted earnings per share	$	0.75	$	2.04	$	2.60

The pro forma information includes adjustments for the effect of the amortization of intangible assets recognized in the acquisition.  This pro forma information is not indicative of future operating results.

Note 4 – Cincinnati Sub-Zero Acquisition – (Continued)

Goodwill

We recorded goodwill of approximately $24,622 arising from the acquisition. The acquired goodwill represents intangible assets that do not qualify for separate recognition. It is estimated that all of the goodwill recognized will be deductible for income tax purposes.  

Intangible Assets

In conjunction with the acquisition, intangible assets of $21,270 were recorded. The Company’s estimate of the fair value of these assets at the time of the acquisition was determined with the assistance of an independent third-party valuation firm. As part of the estimated valuation, an estimated useful life for the assets was determined.

Intangible assets, net consisted of the following:

	December 31, 2016
	Gross Value		AccumulatedAmortization		Net Value		Useful Life
Customer relationships	$	11,700	$	585	$	11,115	15 yrs
Technology		3,200		390		2,810	5 -7 yrs
Trade name		6,370		—		6,370	Indefinite
Total	$	21,270	$	975	$	20,295

Amortization expense of $325 and $975 for the three and twelve months ended December 31, 2016 was recorded as follows:

	Three Months EndedDecember 31, 2016		Twelve Months EndedDecember 31, 2016
Product revenues	$	195	$	585
Research and development expenses		130		390

Amortization expense for the prospective five years is estimated to be as follows:

2017	$	1,300
2018	$	1,300
2019	$	1,300
2020	$	1,300
2021	$	1,135

Property, Plant & Equipment

Property and equipment consist of the following:

Asset category	Useful life	Amount
Land	Indefinite	$	1,630
Buildings	20 yrs		6,024
Machinery and equipment	5-7 yrs		3,718
Computer hardware and software	3-5 yrs		586
Assets under construction			961
		$	12,919